## Facts

- Ira Haupt & Co. was a broker-dealer and exchange member that acted as broker for David A. Schulte.
- Schulte was president and a director of Park & Tilford, Inc. and controlled roughly 92% of its outstanding common stock.
- Schulte pursued actions intended to support or increase Park & Tilford’s stock price, including an unusual dividend plan involving whiskey during wartime shortages.
- Schulte directed Haupt to execute a continuing, price-linked sales program of his Park & Tilford shares (selling 100–300 shares upon specified price movements).
- Haupt sold approximately 93,000 shares under the program, which contemplated the possibility of substantially larger aggregate sales if market conditions permitted.
- No registration statement was filed for the large-scale public resale of Schulte’s control block.
- The SEC instituted an administrative enforcement and disciplinary proceeding to determine whether Haupt had participated in an unregistered distribution as an “underwriter” under § 2(11) of the Securities Act of 1933 and whether sanctions, including exchange membership revocation, were warranted.
- Haupt argued it acted only as a broker executing ordinary market transactions and lacked intent or awareness that it was participating in a distribution.

## Issues

1. Whether sustained, programmatic sales of a controlling shareholder’s stock through exchange transactions constitute a “distribution” within the Securities Act.
2. Whether a broker-dealer executing such sales for a control person is an “underwriter” under Securities Act § 2(11), triggering registration and prospectus requirements.
3. Whether the firm’s conduct warranted disciplinary sanctions, including revocation of its exchange membership.

## Decision

- The SEC found the sales program constituted a distribution of securities from a controlling shareholder to the public.
- The SEC held Haupt participated in that distribution and therefore acted as an underwriter within the meaning of § 2(11).
- Because the transactions were an underwriter distribution, the registration and prospectus requirements applied and were not avoided by characterizing the trades as routine brokerage executions.
- The SEC imposed sanctions reported as including revocation of Ira Haupt & Co.’s exchange membership based on the violation.

## Legal Principles

- “Distribution” is interpreted functionally and can include the public dissemination of a large block of securities through multiple market trades when those trades are part of a coordinated selling program.
- A controlling shareholder disposing of a control block may be treated as an “issuer” for purposes of the underwriter/distribution analysis, so intermediaries assisting the resale can fall within § 2(11).
- Underwriter status turns on participation in the distribution’s mechanics and effects, not on labels, formal disclaimers, or asserted lack of subjective intent.
- Transactions executed over an exchange for a controlling shareholder as part of a distribution remain subject to Securities Act registration and prospectus requirements.
- The registration regime serves investor protection by requiring disclosure before significant control-block resales that can affect market conditions and information symmetry.

## Conclusion

The SEC treated a coordinated, ongoing exchange-trading program that dispersed a control person’s stock into the public market as an unregistered distribution, held the broker-dealer intermediary to be an underwriter under § 2(11), and imposed disciplinary sanctions based on the failure to comply with registration and prospectus requirements.


In re Ira Haupt & Co., 23 S.E.C. 589 (1946)